Lebanese Law Undergoing Major Test

The Lebanese Parliament has approved amendments to the Banking Sector Reform Law after nearly seven years of financial collapse, with the aim of organizing the handling of distressed banks and protecting deposits. The law outlines procedures for an independent assessment of banks and the appointment of a temporary management team capable of making radical decisions, including the distribution of losses according to a specified order that begins with shareholders and creditors, then depositors, with guarantees on how funds will be recovered. However, the law faces challenges related to how the state will bear the financial gap estimated at around $72 billion, and the issue of holding depositors partly responsible for the losses—especially in the absence of a comprehensive law that definitively determines the distribution of losses before implementing reforms. While this law is an important step toward building a more resilient banking system, it does not guarantee the complete restoration of trust or depositors’ funds, and remains dependent on the enactment of other laws to fully address the overall financial crisis.

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